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Continued SVB Fallout, Fraud Charges, & A Digital Credit Union

Continued SVB Fallout, Fraud Charges, & A Digital Credit Union

Founders breath a sigh of relief while Sterling Bancorp and Credit Suisse's worries grow

Robert Baron & Anna Lad
March 17, 2023

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Banking News

Swiss National Bank Lends $54B to Credit Suisse

Credit Suisse’s move to borrow $54B from the Swiss National Bank is an attempt to increase liquidity. The Swiss bank's stock tanked on Wednesday after it was made known in an annual report that Credit Suisse had "material weaknesses in its internal controls over financial reporting." The announcement came just days after Silicon Valley Bank's collapse and takeover by the FDIC.

Sterling Bancorp Acknowledges Mortgage Fraud

The Michigan-based bank pled guilty to securities fraud of nearly $70M. The scam occurred with residential mortgages between 2011 and 2019 in Sterling Bank & Trust’s Advantage Loan Program, which required 35% down payments, had high interest, and gave loans to people who didn't qualify. Executives knew about and encouraged the lies.

Kenneth Polite Jr., Assistant AG of the criminal division of the Justice Department, said:

For years, Sterling originated residential mortgages that were rife with fraud to pad its bottom line and then lied about these loans in its IPO and subsequent public filings, defrauding unwitting investors.

Kenneth Polite Jr.

Credit Union News

CUs Remain Safe, Industry Leaders Assure

After the second- and third-largest bank failures in American history, consumers are frightened about the safety of their money in financial institutions, even though credit unions weren't affected by the collapses of Silicon Valley Bank or Signature Bank. Credit Union National Association (CUNA) president Jim Nussle emphasized the organization's support for the Central Liquidity Facility Act, which permits CUs to buy central liquidity facility (CLF) capital stock.

National Credit Union Administration (NCUA) Chairman Todd Harper said:

The Credit Union System remains well-capitalized and on a solid footing.

Todd Harper

Digital CU Made for Recent Grads

MSU Federal Credit Union's customer base mainly comprises students and alums from the nearby Michigan State University. To further capture recent graduates, it worked with fintech company Nymbus to release an exclusively digital offering, AlumniFi, for the 22-35 age bracket. The digital CU's features include spending insights, saving tips, and goal setting to pay off student loans.

Financial Services & Blockchain

Federal Reserve Launching Real-time Payment System

Starting in July, financial institutions and payment processors can anticipate using FedNow, the Federal Reserve's new payments system. Years of planning and beta testing since September 2022 led to the decision. Regulators believe real-time payments between banks will catch the United States up to other countries' technical infrastructure.

Fintech Founders React As SVB Fails

Hundreds, if not thousands, of tech founders in California's Silicon Valley were beside themselves in the days leading up to the FDIC takeover of Silicon Valley Bank. Tensions eased after the FDIC guaranteed uninsured funds. Still, most founders are busy spreading their assets between multiple institutions, especially big banks like Citi, Wells Fargo, Bank of America, and JP Morgan.

Mike Doniger, COO of fintech childhood investment company Unest, said:

Adding additional relationships and diversifying is the prudent thing to do to ensure we have options available in case there are other emergencies and access to our funds when needed.

Mike Doniger